In what could be a bonanza for lakhs of government employees, the Seventh Pay Commission is likely to submit its recommendations to the finance ministry "soon."

Last month, the union cabinet had extended the deadline for the Seventh Pay Commission to submit its recommendations by four months, to 31 December. 

"The Commission is ready with recommendations and the report will be submitted soon," sources told PTI.

Appointed by the UPA government in February 2014, the Commission was given 18 months to submit its report. 

The finance ministry estimates the central government's expenditure on employees' salaries to rise by nearly 16% to Rs 1.16 lakh crore in the financial year 2016-17 upon the implementation of the recommendations of the Seventh Pay Commission.

The recommendations will benefit about 48 lakh central government employees and 55 lakh pensioners.

The Commission, headed by Justice AK Mathur, is expected to recommend a 40% hike in salaries, according to an analyst at global financial services firm Credit Suisse.

Earlier in August, an official with the Commission told Livemint that the Commission would like to keep the retirement age of central government employees unchanged at 60 years.

"If we lower the age limit, the pension burden will bust the government's medium-term fiscal targets," he had said.

The official also said the Pay Commission's recommendations "need to be effective from 1 January 2016, or by April 2016 at the latest."